5 Takeaways From FCA Postive Compliance Workshop





One of the frustrating things about our industry is how often FCA rules are misinterpreted. This happens so often in fact that several myths have emerged that have no basis whatsoever in legislation.

So when I decided to attend one of the regulator’s Positive Compliance Workshops, covering independence, centralised investment propositions (CIPs) and replacement business a few days ago, I was looking to hear exactly what’s what straight from the horse’s mouth. I was also hoping for more positives and less compliance.

I have to say, I wasn’t disappointed. Not because I learned anything new, but because it was clear the FCA knows misconceptions about its rules are out there, and it is keen to bust these myths. Which is good.


Most Common Causes of Poor Client Outcomes

According to the trainer, the most common causes of poor client outcomes are:

  • Lax consideration of costs
  • Inadequate assessment of client risk, and
  • Lack of due diligence.



On the subject of independence, an FCA trainer reiterated that, while advisers are required to conduct a comprehensive review across the entire retail investment product landscape, this isn’t the same thing as reviewing every product in detail. It is perfectly fine, he said, to whittle down thousands of products into what would effectively become a shortlist, based on a defined set of criteria.


Living Up To Client Agreements

Another thing the FCA representative made clear was that, as part of its third thematic review into firms’ implementation of the Retail Distribution Review rules, the regulator is going to be looking very closely at firms’ ongoing services, specifically to check if firms are delivering what they’ve promised in client agreements.

To my mind this isn’t just about review meetings; it includes everything promised to the customer. For instance, you said you were going to rebalance the client’s portfolio quarterly and help manage their capital gains allowance. Did you? And where is the evidence you did?


Restricted advice

The trainer nipped in the bud the idea that there are many versions of restricted advice. You may have heard of such descriptions as ‘restricted whole of market, or ‘restricted plus’, or, a new one to me, ‘hybrid restricted’ This is total bonkers. You are either restricted or independent, and you must tell clients which in no uncertain terms.



On CIPs, the trainer dispelled the myth the FCA has anything against model portfolios, or any kind of CIP for that matter. However, he did stress that, while it is fine to conduct research and due diligence centrally, suitability has to be demonstrated on a client-by-client basis. I doubt that’ll be a surprise to anyone.

I suspect these areas will continue to be on the regulator’s radar for some time.

If you’ll like to attend one of these Positive Compliance Workshops, take a look here.




Abraham Okusanya
Abraham is the founder of FinalytiQ, a research consultancy for platforms, asset managers, and advisory firms. Recognised as one of the country’s leading experts in retirement income, platforms and investment propositions, Abraham has authored several papers on these subjects and delivered talks to the Personal Finance Society, The FCA and several conferences across the country.

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